It’s been five long years since we were in the midst of the Great Recession, and although many Americans are still feeling the pinch, there’s one aspect of banking that may be shifting back to normal: getting a loan.
It’s easier to get a car loan or a mortgage now than it has been since 2007. One reason why: Banks are more willing to underwrite mortgages for people with less-than-perfect credit scores than they have been in the last few years, Melanie Welsh, president of Envision Mortgage, a mortgage broker, told The Wall Street Journal. It’s also getting easier to score a mortgage for a second home, a feat that has seemed nearly impossible until recently.
Due to the looser lending practices that heavily contributed to the economic downturn, banks have been bound by tight government regulations regarding credit. As a result, many Americans who previously would have been able to secure a loan were left out in the cold.
“Banks had to back away from the [lower-rated but still] creditworthy customers who are exactly the people that need loans the most,” Rick Spitler, co-C.E.O. of Novantas, a firm that provides consulting services to banks, told The Wall Street Journal.
Interest rates are also contributing to a positive environment for people hoping to borrow money: While they may not be at the same basement levels as last year (a 30-year fixed-rate mortgage was at 4.4% interest last week, compared to 3.6% last year at this time), they’re still extremely low from a historical perspective.
But before you rush out the door, expecting to secure a loan, consider this: While it’s certainly easier to get approved than it has been in recent years, lending practices are still far from normal, according to experts. Buyers with mediocre and poor credit can still expect to have a difficult time obtaining a loan, and even those with strong credit histories and scores will still be subject to more scrutiny than before the recession.